Ensuring The Resolvability Of Banking Groups

I. Background

The lessons learned from the recent financial crisis have prompted the European legislator to introduce minimum standards for the resolution of credit institutions (recital 1 and 10 BRRD). In contrast to normal insolvency proceedings, an effective (and credible!) resolution regime could help to reduce the negative impact of an institution's failure on financial market stability, the real economy and taxpayers.

The core of a functioning resolution regime is the resolvability of failing banks. Since the resolvability does not already exist by nature, both regulatory requirements (BRRD including Level II and III Acts) and intensive supervisory intervention are required in certain cases. As these interventions significantly affect the freedom to carry on a business² and the right to property,³ the relevant determinants for the activities of the resolution authorities ensuring this kind of resolvability have to be discussed.